Author Archives: Daily Market Report

Central banks return to gold

World Gold Council/Isabella Strauss-Kahn/7-19-2019

“The dollar is the most widely held reserve asset but, according to International Monetary Fund statistics, gold comes third, accounting for 11% of global reserves. Having been net sellers until 2000, central banks have been net buyers ever since. In 2018 alone, central banks bought 651 tonnes of gold, up 74% compared to 2017 and the highest level since 1971. Over the past decade, central banks have purchased more than 4,300 tonnes of gold, taking their total holdings to around 34,000 tonnes today. The trend has continued in 2019, with net purchases reaching 90 tonnes before the end of the first quarter.”

USAGOLD note:  It is not only the points made in this excellent portrayal but also who is delivering it.  Isabella Strauss-Kahn is the former Director of Market Operations at the Bank of France and Lead Financial Officer for the World Bank. “This is where gold,” she says, “comes into its own, as it fulfills central banks’ three core objectives: safety, liquidity and return.” Her objectives, by the way, fit well those sought by most private investors.

Posted in Today's top gold news and opinion |

Gold retraces some of yesterday’s gains, silver marches higher (up 8.3% this week)

(USAGOLD – 7/19/2019) – Gold is retracing some of yesterday’s sudden strong push to the upside that at one point at the metal trading at just under the $1450 mark.  In today’s early going, it is down $6.50 from yesterday’s closing number at $1436.50.  Silver continues to move on its own independent of its usual attachment to gold’s price trend.  It is up 11¢ at $16.45.  Having started the week at $15.19, silver is now up 8.3%.  Gold is up 1.5% on the week.

The basic rationale behind the movement of late in both metals can be reduced to two words – interest rates.  Over the past few days, the top layer of the FOMC – its chairman, vice chairman and president of the New York Federal Reserve – all came out with statements that the central bank needed to be proactive about a rate cut. In turn, we think future data will show, speculators have begun to take the long side of the market, and in some cases, begun to unwind short positions.

Quote of the Day
“In retrospect, the spark might seem as ominous as a financial crash, as ordinary as a national election, or as trivial as a Tea Party. The catalyst will unfold according to a basic Crisis dynamic that underlies all of these scenarios: An initial spark will trigger a chain reaction of unyielding responses and further emergencies. The core elements of these scenarios (debt, civic decay, global disorder) will matter more than the details, which the catalyst will juxtapose and connect in some unknowable way. If foreign societies are also entering a Fourth Turning, this could accelerate the chain reaction. At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability – problem areas where America will have neglected, denied, or delayed needed action.” – William Strauss and Neil Howe, The Fourth Turning

Chart of the Day

Chart note:  This chart depicts U.S. government receipts and expenditures from 1950 to present.  Note the growing gap between incoming and outgoing – the difference for the most part filled by additions to the national debt.  Given the established trend, that gap in all likelihood would have continued widening without the imposition of the new tax reduction program and simultaneous growth in government spending.  With tax reductions now in place, the distance between the two lines is likely to widen even further.  This is the second last installment in our series on the national debt.  Tomorrow, we will post the final entry.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold gives up some of yesterday’s gains, silver pushes higher

(USAGOLD – 7/18/2019) – Gold is giving up some of yesterday’s solid gains this morning – down $7.50 at $1417.50.  Silver, though, continues to be the big surprise – up 12¢ in the early going at $16.08.  Over the past week, it is up over 6.5%. Gold by contrast is up 1% over the same period. Writing at ETF Daily News, Taylor Dart sees a bright future for gold over the longer term. “Breakouts from multi-year bases typically either correct through time or price,” he says, “and thus far it’s looking like gold might end up correcting through time. This would be the best-case scenario as it would allow the metal to build a new launchpad above its prior multi-year resistance. I would consider any pullbacks down to the $1,370/oz area to be buying opportunities, especially if these dips are coupled with bullish sentiment falling below the 50% bulls level. As long as gold defends the $1,325/oz on a weekly close, I would consider any pullbacks to be buying opportunities. The next real resistance for gold doesn’t come in until $1,560/oz.”

Quote of the Day
“Most serious accidents have multiple causes. A series of mistakes or pieces of bad luck line up to allow disaster. The Torrey Canyon was hampered by an unforgiving schedule, barely adequate charts, unhelpful winds and currents, confusion over the autopilot, and the unexpected appearance of fishing boats in the intended course. But reading Richard Petrow’s contemporary account of the Torrey Canyon disaster, a clear lesson is that Capt Rugiati was too slow to adjust. He had a plan, and saw far too late that the plan was doomed to failure — and with it, his ship.” – Tim Hartford, Financial Times columnist

Chart of the Day

Chart courtesy of GoldChartsRUs/Nick Laird

Chart note: This chart shows the oft-referenced flow of gold west-to-east combined with the growth of internal reserves the result of channeling mine production into central bank holdings. The principal players – China, Russia, Turkey and India – are the beating heart of the global market for physical gold bullion. There is no evidence that there will be a major reversal in this structural pattern in global supply and demand anytime soon. Please take note that the four countries combined monthly demand is now running consistently above global production, as shown on the bottom segment of the chart.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold Market Update

(USAGOLD – 7/17/2019) – In the absence of other news, we see silver’s upside over the past few days as the primary influence on gold’s strong move today. Silver is pulling gold higher along with it.  We also see gold’s holding firmly above the $1400 level as an important technical factor encouraging many speculators to go long and others to cover their short positions. Too, it doesn’t hurt to have people the stature of Ray Dalio speaking so forcefully in gold’s favor as a long-term hedge. (Scroll below)

TODAY. . . .
Gold –– + 1.56%
Silver –– + 2.50%


Stay tuned. . . .We will update if more information becomes available.

Posted in Today's top gold news and opinion |

Silver up sharply again today – posts 4% gain since last Thursday

(USAGOLD – 7/17/2019) – Gold continues to muster support in and around the $1400 mark, but silver of late has begun to show the early signs of renewed strength.  The former is trading at $1408.50 on the day – up $3. The latter is up another 18¢ at $15.73. Today’s upside follows the two previous days’ increases that came despite gold’s sluggish performance.  Silver is up almost 4% since last Thursday while gold is up less than 0.5% – an unexpected turn of events.

In Monday’s DMR (Chart note), we cited silver’s lag with respect to gold and made a point worth repeating: “We will point out for the record though that silver lagged gold’s run early in the years of the credit crisis. It played catch-up, however, as the rally in precious metals prices unfolded over the next three years.  In November 2008, the gold ratio was 80 to 1.  By April 2011, it was 30 to 1.”  Even so, we are still surprised by silver’s “breakout” of the past few days – driven, we think, by its underpricing relative to gold and some judicious, proactive short covering.

Quote of the Day
“As central banks have upped their ante to gold, investors searching for ways to optimize portfolio outcomes might ask if they could potentially benefit by taking a page from the central bank playbook—using gold to diversify their own portfolios.” – Juan Carlos Antigas, World Gold Council

Chart of the Day

Image courtesy of HowMuch.net (Click to enlarge)

Chart note:  “In 2010,” says HowMuch, “the world’s central banks stopped selling gold and started accumulating it. As gold provides a hedge against economic uncertainty and currency manipulation, the action of these central banks gives us insight as to which countries are most capable of handling an economic storm. . .A common theme in economics is ‘those who own the gold make the rules.’ Recent statistics suggest a large disparity between the top gold holders in the world and those governments holding less of the yellow metal.”

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold tracks marginally lower under generally muted market conditions

(USAGOLD – 7/16/2019) – Gold continued to track in a southerly direction this morning under generally muted conditions in most financial markets.  It is down $6 at the open of New York trading  at $1410.  Silver is up 2¢ at $15.42. Since the end of May, when gold staged a turnaround, it is up 8% as investors moved to safe-haven investments to counter a range of economic and political uncertainties.  Silver, not to be overlooked, is up 6.1% over the same period after yesterday’s unexpectedly strong showing.

For most a flight to safety means a flight to cash – at least temporarily if not on a longer term basis, but cash also has its downsides particularly if inflation – even modest inflation – becomes a factor in a period of declining interest rates.  “Cash over the long run is the worst performing asset class,” says Bridgewater Associate’s Ray Dalio in an interview with Goldman Sachs, “and therefore the riskiest asset class. So where do you go? To me, going to any one asset increases risk. So the best way to deal with the challenging environment I foresee is by diversifying well. . . [G]old is just an alternative currency to fiat paper currencies,” he goes on. “If your portfolio is likely to perform poorly in the adverse environment I’ve been describing—less effective monetary policy, the need to run larger fiscal deficits and monetize them, and challenging politics—the behavior of gold as alternative cash has some diversifying merit.” [Source:  Zero Hedge – 7/12/19]

Quote of the Day
“I find that for me, being a history buff makes it almost impossible not to be a believer in the metal that has been a fixture and sign of value and wealth since ancient times. I am a gold bug and have been since I first started in the commodities business in the early 1980s. There is no other asset that gives a person the same feeling than gold. Holding a kilo bar of the yellow metal is a feeling that no other investment can elicit.” – Andrew Hecht, Commodities Analyst, Seeking Alpha

Chart of the Day
Chart note:  Since the turn of the new century, gold has been a stellar performer rising fourteen of the nineteen years (if you include 2019 as of July 12).  The period featured a disinflationary economic bias dominated by investor concerns about the stability of global financial markets and systemic risks particularly in the period from 2000 to 2012.  Since then, the performance record has been less consistent.  Beginning in 2016, though, gold is back on solid footing with positive returns three of the past four years (once again counting 2019 at the mid-year point).

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold tracks lower, takes breather as silver rises

(USAGOLD – 7/15/2019) – Gold is tracking lower in early U.S. trading as speculators look favorably upon precious metals with an industrial component in their pricing – silver, platinum and palladium.  Silver is up 11¢ on the day at $15.32. (Please see today’s Chart of the Day.)  Platinum and palladium are up 1.54% and 1.25% respectively in the early going.  Gold meanwhile is taking a breather after last week’s see-saw proceedings – down $3 at $1412.  Though the safe-haven trade appears to be sidelined this morning, it may not be for long with central banks around the world signaling underlying economic weakness and the need for aggressive stimulus.

“Gold is more than just a commodity,” says long-time technical analysts John Murphy at StockCharts. “Gold is sometimes also viewed as an alternate currency. When global traders lose confidence in their currency, they often turn to gold as an alternative store of value. . .Gold recently rose to a six-year high on falling U.S. interest rates which have weakened the dollar (aided by a more dovish Fed). So gold is rising in dollar terms. The true hallmark of a bull market in gold, however, is its ability to rise relative to other major currencies. And it’s doing just that.”

Quote of the Day
[OPINION] – “In their conspiracy theories, frustrated silver bulls were missing the one obvious conclusion confirmed by the Blythe Masters interview, that JPMorgan was, and probably still is, working for the Chinese central bank as their client. China is the whale in the market, which explains why we see the lack of correlation between the largest four traders and the second four going back over a decade. Bear in mind also that the commitment of trader’s reports covering Comex are not the whole story. Forward trades in London on the LBMA are a significantly larger market and JPMorgan operates its own vaults in London as well.” – Alasdair Macleod, GoldMoney

Chart of the Day

Chart note:  As you can see in this chart, silver has not kept pace with gold’s rally since the end of May.  It has gone up, but with not nearly at the same velocity as gold. So much so that the gold-silver ratio now stands at nearly 93 to one, its highest level since 1991.  The most plausible theory for silver’s lag is that it relies on industrial applications for demand and that a recession would undermine that demand.  Some see opportunity in this chart, others cause for concern.  We will point out for the record though that silver lagged gold’s run early in the years of the credit crisis. It played catch-up, however, as the rally in precious metals prices unfolded over the next three years.  In November 2008, the gold ratio was 80 to 1.  By April 2011, it was 30 to 1.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold up modestly in early trading – holding above the $1400 level

(USAGOLD – 7/12/2019) –  Gold is up modestly in early trading following yesterday’s steep sell-off on a worse-than-expected inflation report. Only in this upside-down, Alice-in-Wonderland investment climate can an item generally viewed as an inflation hedge decline on news of a possible return of inflation. But decline it did. This morning the yellow metal is making an attempt at recovery trading tentatively at $1406 – up $2 on the day.  Silver is down 1¢ at $15.10. TIAA Bank’s Chris Gaffney remained optimistic after what he described as gold’s “knee jerk reaction” to the inflation report. Yesterday’s move, he told Reuters, was “just an adjustment of the fact that maybe it had gone up a little fast [on Wednesday], but is still holding nicely above $1,400, and it looks like we are going to continue holding above $1,400.” The overriding issue remains monetary policy and perhaps before too long the Fed chairman’s clearly-stated dovish stance will regain the upper hand in gold’s pricing.

Quote of the Day
“An ounce of gold cost $271 in 2001. Ten years later it reached $1,896—an increase of almost 700 percent. On the way, it passed through some of the stormiest periods of recent history, when banks collapsed and currencies shivered. The gold price fed on these calamities. In a way, it came to stand for them: it was the re-discovered idol at a time when other gods were falling in a heap of subprime mortgages and credit default swaps and derivative products too complicated to even understand. Against these, gold shone with the placid certainty of received tradition. Honored through the ages, the standard of wealth, the original money, the safe haven. The value of gold was axiomatic. This view depends on a concept of gold as unchanging and unchanged—nature’s hard asset.” – Matthew Hart, Vanity Fair

Chart note:  We ask the indulgence of our regular readers who have seen this chart before. We have had quite a few new visitors over the past few weeks looking into gold for the first time, and this chart more than any other, we feel, is central to understanding why gold continues to make sense as a long-term portfolio holding. When the United States abandoned the gold standard in 1971 and freed currencies to float against one another, the fiat money era began. We are still in that era today. This chart shows the performance of gold from the early 1900s to 1971 when gold backed the dollar, and the era from 1971 to present when it did not. Gold has had its ups and downs since 1971, but clearly, over the long run, in the absence of an official gold standard, individual investors have been well-served by putting themselves on a private gold standard.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold retreats on modest profit taking; James Dines proclaims ‘This is it’

(USAGOLD – 7/11/2019) – Gold retreated this morning in what appears to be modest profit-taking after yesterday’s solid $23 run-up. It is down $6 on the day at $1416.  Silver is down 9¢ at $15.21. Gold pushed higher yesterday when it became clear from chairman Powell’s opening statement that the Federal Reserve was moving toward closer alignment with the White House on interest rates and dollar policy. In a note reported by Bloomberg last night, Vanguard Markets’ Stephen Innes summed up what that public crystallization of the Fed’s position might mean for gold:

“Although there will be a few bumps on the way given the level of skepticism in the first gold rally cycle, we think there will be an even greater rush for gold in the coming weeks and months. So gold prices could stay on an upward path as central banks pivot to an easing stance, the U.S. dollar turns gradually weaker with a more dovish Fed and the burden of harmful yielding debt rises.”

For some of you the name James Dines might ring a bell.  Touted as the “original gold bug” for his recommendation to buy gold in the late 1960s, he told Outsider Club‘s Nick Hodge that that big money is rotating out of FAANG technology stocks and into safe havens including gold. Hodge says he has never heard the veteran market analyst more decisive about a gold bull market. “This is it,” says Dines.

Quote of the Day
“Rather than let the market adjust itself, government typically starts the process all over again with a new and larger ‘stimulus package.’ The more often this happens, the more ingrained become the distortions in the way people consume and invest, and the nastier the eventual depression. This is why I predict the Greater Depression will be … well … greater. This is going to be one for the record books. Much different, much longer lasting, and much worse than the unpleasantness of 1929-1946.” – Doug Casey, International Man

Chart of the Day

Chart note: This chart compares price appreciation for gold and the dollar index. Gold has consistently outperformed the dollar in twelve of the last eighteen years – a formidable record. Even if one were to add in average yields on dollar-based investments, gold still comes out the clear winner in those twelve years. Gold had an off-year in 2018 – down 1% while the dollar was up almost 7%. So far in 2019, though, gold has returned to form with an 11.1% thus far this year (through July 10, 2019).

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold bolts higher on Fed chair testimony – up $16 on strong COMEX volumes

(USAGOLD – 7/10/2019) – Gold bolted higher this morning on a clear, unambiguous statement from Fed chairman Powell that investment and the economy were slowing and that the central bank would act accordingly. The metal is up $16 at $1411.50.  Silver is up 19¢ at $15.31. “Many FOMC participants saw that the case for a somewhat more accommodative monetary policy had strengthened,” said Powell. “Since then, based on incoming data and other developments, it appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. economic outlook.”  Morgan Stanley, in addition, forecasted that the FOMC would cut interest rates by 0.5% at its July meeting – a prediction that will take many by surprise following last week’s healthy jobs report. Volume shot notably higher on the COMEX August gold contract as result with the price advancing quickly once again over the $1400 mark.

Quote of the Day
“If we don’t quite know what the future holds, there is little point in getting carried away by very fancy mathematical calculations of optimal portfolios. Don’t rely on past data to be a good guide. Try to think through what mix of assets gives you the best chance of surviving some big event. That must mean including assets that are negatively correlated or uncorrelated in your portfolio. And I am very struck by the fact that over many many years, central banks, governments and individuals have always, despite the protestations of economists, held some gold in their portfolio. Obviously, there is no high running return, but when unexpected things happen, particularly when governments rise and fall, then gold is a means of payment that everyone is always prepared to accept. And I think that’s why even central banks have always had a role in their portfolios for gold.” – Mervyn King, former Governor, the Bank of England

Chart of the Day

Chart note: Whether or not China will begin unloading its very large hoard of U.S. debt is a subject of much concern, but its intentions are one part of the much larger global de-dollarization puzzle. This chart shows the change in U.S. debt held by foreigners and international investors in billions of dollars from 1970 to present.  The level of ownership grew proportionately over time in concert with the overall issuance of U.S. debt until 2015, when it began to fall off.  The problem is not just that foreign investment in U.S. Treasuries is on the wane.  It is that the retreat has come at a time when U.S. borrowing needs are expected to consistently exceed $1 trillion per year. The question becomes, “How is the U.S. federal debt going to get financed?”  (For more detail, please see The $12 trillion federal debt bombshell –  A NEWS & VIEWS SPECIAL REPORT)

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold tracks sideways ahead of Powell Congressional testimony

(USAGOLD – 7/9/2019) – Gold tracked sideways this morning after a quiet night overseas.  It is down $1 at $1394. Silver is down 6¢ at $15.09.  Generally speaking, the markets are on hold awaiting the testimony of Fed chairman Powell starting tomorrow before the House. With an FOMC meeting looming at the end of the month, expectations are that Mr. Powell will tread lightly though there is always the chance something might be said to touch off either the White House or Wall Street.

The World Gold Council is out with a report this morning showing a strong 5% gain in gold stockpiled by ETFs and a 15% gain in net dollar value, more than half of which was the result of price appreciation. North American investors led with a 5% gain in tonnes stockpiled.  Europe was second at 4.7%. Asia lagged at a 3.3% gain.

“Earlier this year,” says the Council, “we noted that rates related to monetary policy would drive gold prices in the short-run, and that the US dollar would play a less significant role, and this has been the outcome so far. With rates falling, global negative-yielding debt is at all-time highs – above $13 trillion – and the price of gold has moved in tandem with those amounts over the past few years. These are all drivers that could continue to support gold prices in the second half of the year.”

Quote of the Day
“Sir Isaac Newton was asked by the British Treasury officials and financiers of his day why the monetary pound had to be a fixed quantity of precious metal. Why, indeed, must it consist of precious metal, or have any objective reality? Since paper currency was already accepted, why could not notes be issued without ever being redeemed? The reason they put the question supplies the answer; the government was heavily in debt, and they hoped to find a safe way of being dishonest. But Newton was asked as a mathematician, not a moralist. He replied: ‘Gentlemen, in applied mathematics, you must describe your unit.’ Paper currency cannot be described mathematically as money.” – The God of the Machine, Isabel Paterson (1943)

Chart of the Day

Chart note:  Gold is up about 12.5% from July 2018 from $1255 to $1414 (7-4-2019).

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold finds support once again just below $1400, gains momentum in overseas trading

(USAGOLD – 7/8/2019) – Gold found support once again late Friday at just under $1390 level returning to $1400 by the end of the day.  It then gained momenturm in Asia and Europe overnight and is trading now at $1403 – up $3 over Friday’s close. Silver is up 10¢ on the day at $15.09.Though recession worries and the potential for lower U.S. interest rates still head a longer list of concerns, the problems at Deutsche Bank have also begun to weigh on financial markets.

As posted at our live daily newsletter page this morning, gold ownership among Germany’s citizenry already rivals that of Japan and China – nearly 9000 tonnes in private hands. That figure is likely to grow in the wake of the now-exposed depth of the problem at Germany’s largest bank and the associated risk it imposes on the rest of Europe’s financial system. To many, the problems at the bank, including the massive layoffs beginning this week, are reminiscent of the problems at Lehman Brothers in 2008 just before it collapsed.

In an interview at CNBC on Friday, Standard Chartered Bank’s Suki Cooper weighed in on gold’s future prospects following last week’s correction from the $1435 level. “There are a number of macro factors that have turned very positive for gold, and even though we’ve seen a little bit of a pullback, we think this is actually a healthy correction. Those key drivers of a weaker dollar, falling yields and the continued uncertainty and potential risk that we might see a widespread recession are spurring investors to turn to gold once again as a safe haven asset.” She added that the nomination of Christine Lagarde to head up the European Central Bank “created an even more bullish environment for gold.” [Emphasis added]

Quote of the Day
“For we have reached a critical point. In a sense, it is true that the mists are lifting. We can, at least, see clearly the gulf to which our present path is leading. Few of us doubt that we must, without much more delay, find an effective means to raise world prices; or we must expect the progressive breakdown of the existing structure of contract and instruments of indebtedness, accompanied by the utter discredit of orthodox leadership in finance and government, with what outcome we cannot predict.” – John Maynard Keynes, The Means to Prosperity (1933)

Chart of the Day

Chart note:  This chart shows the gains or losses in gold from the same month a year earlier. From 2002 through 2011 those gains were consistent. After a down period beginning in 2012, and running through 2015, gold’s performance became less consistent.  It then swung back to a more positive trend beginning from early 2016 to present. In June 2019, gold posted one of its strongest returns by this measure in some time – 12.67%. Throughout the period, the gold price was reacting to disinflationary circumstances when its value as a safe-haven store of value captured investors’ attention.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold drops $30 on jobs report, still up $102 since late May turnaround

(USAGOLD – 7/5/2019) – Gold dropped $30 this morning upon release of the Labor Department’s payroll report showing a larger than expected gain in employment in June.  The TradingView chart (shown below as our Chart of the Day) records massive paper sales of the metal over a less than two-hour period that dropped the price from $1420 to $1390.  Silver is down 32¢ at $15.02. To end what has been a volatile week for gold, we revisit a couple of quotes from a Financial Times article that serve as a reminder why many investors own gold in the first place. On a day like today, it helps to keep one’s perspective.

“You’d be surprised,” says Laurie Kamhi, managing director of a fund that serves entrepreneurs and executives, “at how many of them invest in bars as a way to store money.”  Brent Armstrong, a partner at Weatherly Asset Management which caters to clients $2 million to $25 million in assets, says gold is a unique commodity. “We can look at its use in jewelry and electronic products,” he says, “but it’s also been a human emotional store of value for thousands of years.”

Money managers, by and large, tend to focus on the bottom line, i.e., the tangible return on investment. With gold, though, there is also an intangible reward – peace of mind. In the end, there is much to be said for that quality of the precious metals which addresses the basic need for a reliable store of wealth in financially challenging and uncertain times – even on days less rewarding than others. Even with today’s downside factored into the equation, gold is still up $102, or 8%, since the late May turnaround at $1288 per ounce.

Quote of the Day
“The moral of the story is that nobody should be complacent in these times when recession risk is so high, especially because the coming recession is likely to set off a global cluster bomb of dangerous bubbles and debt. The current probability of a recession is the same as it was during the Big Short heyday of 2007 when subprime was blowing up – just let that sink in for a minute. Do you think ‘this time will be different’? How can it be different when we didn’t learn from our mistakes and have continued binging on debt and inflating new bubbles?! Anyone who believes that ‘this time will be different’ is seriously delusional and will be taught a very tough lesson in the not-too-distant future.” – Jesse Colombo, Real Investment Advice

Chart of the Day

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Early Fourth of July fireworks yesterday give way to downside today

(USAGOLD – 7/3/2019) – Fourth of July fireworks came early to the gold market yesterday with a nearly $45 price eruption and a quick return to last week’s highs of over $1435 per ounce. This morning, however, it is a different story with gold giving up a portion of those gains. It is down $11 in today’s early going at $1420.  Silver is down 13¢ at $15.25. “Gold resumed its rally above $1,400 an ounce on a cocktail of positive drivers,” writes Bloomberg’s Ranjeetha Pakiam this morning, “with weak data feeding expectations for fresh easing from central banks, Treasury yields hitting a two-year low, and the U.S. president seeking to reshape the Federal Reserve board with two picks seen as doves.” To that “cocktail of positive drivers” we would add one more – White House trade advisor Peter Navarro’s announcement yesterday that the United States and China were “still a long way off” on a trade deal. Since the late May turnaround at $1277, gold is up $143 or 11.2%.

Quote of the Day
“But there is a real underlying risk that by deploying and using its economic weaponry so frequently the U.S. will, in the long run, drive others, friend and foe alike, away from its economic orbit. ‘These are not zero-cost options,’ says Robert Hormats, former under secretary of state for economic affairs and an adviser on international economics for presidents going back to Richard Nixon. Imposing tariffs on China and other nations trying to send their goods to the U.S. not only raises the prices of those products for Americans, it also gives targeted nations an incentive to develop markets, and long-term trade ties, in other countries.” – Gerald F. Seib, Wall Street Journal

Chart of the Day

Chart note: J.P. Morgan Asset Management released a report recently ranking investments over the past twenty years. It shows gold as the second best performer over the period at a 7.7% average gain annually. REITs were number one at a 9.9% gain. Stocks ranked fourth at 5.6%.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold regains some lost ground – ‘expect markets to keep singing gold’s praises’

(USAGOLD – 7/2/2019) – Gold regained some of yesterday’s lost ground in early U.S. trading today.  It is now up $7 on the day at $1393 as the after-effects of the Trump-Xi agreement to restart talks begin to fade. Silver is level at $15.16. In a client note distributed yesterday and included in  Reuters’ afternoon gold market report, Commerzbank summed up what many were thinking. “We do not expect gold to fall significantly further,” it said. “In our view, it is above all the upcoming European Central Bank and Fed rate cuts, and the political risks, that argue against any pronounced and lasting price slide.”

Continuing with that theme, Financial Times‘ Lex columnist offers this strongly-worded take on current gold market dynamics: “These days it is not dollars that emerging countries feel they have to hold. They want gold, and plenty of it. Since the first quarter of 2015, central banks in China, Russia, India and Turkey have boosted their gold holdings by two-thirds to 4,960 tonnes. Diplomatic and trade rows with the US explain some of this buying. There is a move to avoid buying dollars for their foreign exchange reserves. . . US interest rates are probably headed down. That move should depress the dollar against other currencies. Expect markets to keep singing gold’s praises.” [Emphasis added]

Quote of the Day
“Well, my recommendation is, since we came off the gold standard in ’71, put yourself on the gold standard. So, I’m a very simple man. I save gold and silver coins. I have no ETFs. I don’t have savings. I keep my money out of the banking system. So, I’m on the gold standard. I operate outside the banking system. And I’m accountable. I am responsible for my own life. Trump’s my friend. I don’t expect him to take care of me, my God. All these people, Social Security we know is going bust. It’s got no money. I think 78 cents of every dollar collected in taxes now goes to entitlement programs or the debt. We can’t keep functioning like this.” – Robert Kiyosaki, Rich Dad Poor Dad

Chart of the Day

The biggest foreign holders of U.S. debt

Click to enlarge. Chart courtesy of HowMuch.net

Chart note: “The total amount of treasury securities issued to foreign countries is $6.433 trillion,” says HowMuch.net. “China currently holds the most U.S. debt due to a variety of factors, including China’s desire to keep the yuan weak compared to the dollar. Most of the treasury securities held by other countries are in the form of treasury notes and bonds, rather than treasury bills. The top five countries in the visualization (China, Japan, Brazil, United Kingdom, and Ireland) account for almost half of the treasury securities held by foreign countries.”

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold down in mixed reaction to Trump-Xi agreement

(USAGOLD – 7/1/2019) – Gold is down $15 at $1394 in early U.S. trading after being down more than $25 in Asia overnight as financial markets attempt to sort out the implications of the Trump-Xi agreement to re-open trade talks. Silver is down 11¢ at $15.21. “The setback [for gold] might be temporary,” reports Bloomberg this morning, “as investors now train their focus on U.S. jobs data due Friday for clues on the Federal Reserve’s next move on policy.” Sharps-Pixley’s Ross Norman, also quoted in that Bloomberg article, was philosophical about the sell-off:  “Gold was well overdue a period of consolidation and gold bulls should welcome it. This provides a welcome entry point.” Adding some credence to the notion that the downside might be short-lived, other items in the commodity complex – oil, palladium and platinum – bolted higher even as gold and silver prices declined. The dollar, at the same time, is up but not convincingly. In short, this morning’s markets are a mixed bag sending mixed signals.

Quote of the Day
“[Y]ou should have it [gold] because you never know what our political leaders are going to do. . . Gold keeps its intrinsic value better than anything else. When you see the nominal price change, that’s not the value of gold changing, that’s the value of the dollar or whatever currency you’re talking about, changing in value. Gold is the constant, like the North Star. Yes, you should have it, a piece of it, just for peace of mind.”Steve Forbes, Forbes magazine

Chart[s]of the Day
At mid-year, we thought it appropriate to post a quick run-down on gold’s performance in a select group of currencies over the past twelve months as of Friday’s closing prices.

European euro + 15.7%
Chinese yuan + 17.1% Japanese yen + 10.2%Indian rupee + 13.6%British pound + 16.3% United States dollar + 12.8%

Charts courtesy of BullionStar.com

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold finds support, treks higher, paces sidelines awaiting Trump-Xi outcome

(USAGOLD – 6/28/2019) – Gold continued to pace the sidelines this morning awaiting the outcome of the Trump-Xi meeting in Japan on Saturday.  The good news, though, comes from a technical perspective. For a second time this week, the yellow metal found support just above the $1400 mark then trekked higher regaining almost $10 in the price to finish at $1411. In today’s early going, it is up another $3 at $1414.  Silver is level on the day at $15.28.

Whether or not gold has drawn a line in the sand at $1400 remains to be seen, but traders and speculators are likely to take note of those reversals as a good sign. As of this morning’s pricing, gold is up $15 for the week (1%) and up $108 in the month of June (8.25%).  Silver is level on the week, but up 69¢ for the month (4.75%).

A Financial Times article on gold published this morning highlights a couple of eye-catching quotes from money managers whose clients invest in gold.  Laurie Kamhi, managing director of a fund that serves entrepreneurs and executives says, “You’d be surprised at how many of them invest in bars as a way to store money.”  Brent Armstrong, a partner at Weatherly Asset Management which caters to clients $2 million to $25 million in assets, says gold is a unique commodity. “We can look at its use in jewelry and electronic products,” he says, “but it’s also been a human emotional store of value for thousands of years.”

Money managers, by and large, focus their attention on the bottom line, i.e., the return on investment.  With gold, though, there is also a psychological reward – peace of mind. In the end, there is much to be said for the non-monetary side of the precious metals, i.e., that quality which addresses the need for a reliable store of wealth in financially challenging and uncertain times.

Quote of the Day
“I remember being told many years ago on a South African game reserve that the buffalo was the most dangerous of the big five game animals. In large part, this is because of the complacency shown towards them relative to the other, more obviously dangerous big five game animals (ie the lion, leopard, rhino and elephant). It’s also a fact that unlike the other big five, the buffalo gives no warning of an imminent charge. It’s complacency that gets you killed, and the same goes for investors with the macro-risks. We all know what the big macro-imbalances are out there, caused by years of loose money, but investors continue to ignore them at their peril.” – Albert Edwards, SocGen

Chart of the Day

Chart note: Up until the “double oughts,” the manual on gold read that it performed well under inflationary and deflationary circumstances, but not much else. However, as the decade of asset bubbles, financial institution failures, and global systemic and sovereign debt risk progressed, gold marched to higher ground one year after another. As events unfolded, it became increasingly clear that the metal was capable of delivering the goods under disinflationary circumstances as well. The fact of the matter is that during the 2000s – even as the inflation rate hovered in the low single digits (green area on chart] – gold managed to rise from under $300 per ounce in the early 2000s to nearly $1900 per ounce by 2011, a gain of roughly 633%.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold falls back to just above the $1400 level, looking for support

(USAGOLD – 6/27/2019) – For the second time in two days, gold has fallen near the $1400 mark. Whether or not support will hold at that level is the question of the day. It is now trading at $1402 – down $9.50 on the day.  Silver is trading at $15.24 – down 7¢ on the day. Financial markets, in general, look restrained this morning pending the outcome of the Trump-Xi meeting on Saturday coupled with the arrival of the annual summer doldrums.

With the assortment of issues preying on investor psychology, though, 2019 might be one of those years when we bypass the annual slowdown. “Gold trading usually gives pundits, dealers and investors a break at some point over the summer,” observes Adrian Ash at BullionVault. “But like 2007, 2008, 2009, 2011 and 2016…this year is proving no time to take your eye off the market. And if 2019 is going to see an old skool summer lull in gold trading, it won’t feel much like a discount up at these prices.”

Overall a potential global recession and attendant looser monetary policies might be an even greater and enduring influence at this juncture than seasonal market considerations. The Sino-American trade war figures largely in that discussion. Expectations linger that barring a surprise the two parties will likely agree on little more than to keep talking.  Come Monday, should that assessment become reality, we could be looking at a completely different gold market from the one we see today.

Quote of the Day
“It took the United States 193 years to accumulate its first trillion dollars of federal debt—the gross debt, as it’s called. We will add that much in the current fiscal year alone. All told, the government owes $21.5 trillion, give or take a few careless tens of billions—that works out to $65,885 for each American. It’s the ease of borrowing that drives the growth in federal IOUs. The remote political cause of this predicament is the ideology of statism. In Washington, this takes the form of tax and tax, spend and spend, elect and elect; on Wall Street, it’s found in too-big-to-fail, a virtually socialized mortgage market, and an overreaching, manipulative central bank.” – James Grant, Time To Worry, The Weekly Standard;  (Also see Grant’s Interest Rate Observer)

Chart of the Day

Chart note:  This chart depicts U.S. government receipts and expenditures from 1950 to present.  Note the growing gap between incoming and outgoing – the difference for the most part filled by additions to the national debt.  Given the established trend, that gap in all likelihood would have continued widening without the imposition of the new tax reduction program and simultaneous growth in government spending.  With tax reductions now in place, the distance between the two lines is likely to widen even further.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold trends lower on Fed signals, traders and investors continue to buy the dips

(USAGOLD – 6/26/2019) – Gold continued to trend lower overnight and into the New York open on profit-taking and signals from Fed chairman Powell yesterday that any interest rate cut at its July meeting would be modest. Though some gold traders and investors are taking profits, others continue to buy the dips. As a result, gold is down $7 in today’s early going at $1411 after being down as much as $16 in overnight trading. Silver is level at $15.32. Gold hit six-year highs in yesterday’s overnight trading at $1437 per ounce. Goldman Sachs revamped its forecast for gold yesterday projecting a $1475 average price over the next twelve months.  It says $1600 is possible if slow growth hampers developed market economies.

Quote of the Day
“The ‘threat’ is best seen through the emergence of exchange-traded funds (ETFs), which allow investors to get a proxy physical gold exposure through an investment via their stockbroker. In truth, these products are, in many cases, more expensive than trading and storing physical gold (especially for larger investors with a long-term investment time frame), have less trading flexibility, and are less secure than owning real physical gold.” – Jordan Eliseo, ABC Bullion/Australia

Chart of the Day

Chart note: “Central bank net purchases reached 651.5t in 2018, 74% higher year over year,” says the World Gold Council in its year-end gold demand report. “This is the highest level of annual net purchases since the suspension of dollar convertibility into gold in 1971, and the second highest annual total on record. These institutions now hold nearly 34,000 tonnes of gold. Heightened geopolitical and economic uncertainty throughout the year increasingly drove central banks to diversify their reserves and re-focus their attention on the principal objective of investing in safe and liquid assets.”

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold hits $1439 in overnight markets then takes a breather

(USAGOLD – 6/25/2019) – Gold is taking a breather this morning after a week of lightning-fast price increases that took it from $1339 last Monday to nearly $1439 last night during Asian trading hours – up $100 on the week.  It is now trading at $1429 – up $4 on the day.  Silver is down 6¢ on the day at $15.41. We are beginning to see fairly strong support on price dips – a further indication of the important sentiment change we have mentioned previously in this report.  We should not rule out short-covering as an additional contributing factor to gold’s quick rise.

The fundamental motivation for gold’s strong showing, most analysts agree, is the stimulus policies announced or signaled by the world’s major central banks including the Federal Reserve. Most expect that motivation to be reinforced at this week’s G-20 meeting in Japan. The wild card, though, is the sideline meeting between China’s premier Xi and the U.S. president on trade issues.  In the absence of any leaks or posturing of significance, we suspect financial markets could go on hold until a clearer picture emerges from those talks toward the end of the week – though gold’s erratic price behavior this morning does not follow along with that logic.

“I believe this breakout is the real deal,” Bill Fleckenstein, the well-known market analyst, tells King World News, “and the resumption of the bull market in gold is finally upon us. I have no idea how high gold can go, but there is no shortage of reasons to cause folks to want to own some, although I’m not going to bore everyone by reciting all the potential catalysts once again. Now that gold is in motion, it will create more buying interest. Even though everyone claims they want to buy assets on the cheap, what they really want to do — now more than ever — is buy something that’s moving.”

Quote of the Day
“Despite a Federal Reserve that doesn’t know what it is doing – raised rates far too fast (very low inflation, other parts of world slowing, lowering & easing) & did large scale tightening, $50 Billion/month, we are on course to have one of the best Months of June in US history……Think of what it could have been if the Fed had gotten it right. Thousands of points higher on the Dow, and GDP in the 4’s or even 5’s. Now they stick, like a stubborn child, when we need rates cuts, & easing, to make up for what other countries are doing against us. Blew it!” – President Donald J. Trump at the RealDonaldTrump, 6-24-2019

Chart of the Day

Chart note:  Since gold’s turnaround at the end of May, it is up $155 per ounce or 12.3%.  It is up $100 since June 17th (last Monday). Increasingly we are seeing evidence of investors and traders buying on the dips. Investors primarily are buying physical metal for safe-haven, store-of-value purposes. Traders, according to analysts, are buying both to speculate on the long side and to cover shorts.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold pushes tentatively over $1400 mark in early trading – ‘a dramatic change in sentiment’

(USAGOLD – 6/24/2019) – Gold pushed tentatively over the $1400 mark in overnight trading and managed to hold that position in early U.S trading.  It is now priced at $1407 and up $7 on the day – nice, neat symmetry at an important number.  Silver is level on the day at $15.35.  Though gold has led the way since this uptrend began at the end of May with a 10% gain, silver has shown itself to be a reluctant, but reasonably productive participant – up 6.4% over the same period. Now at a near record almost 93 to one ratio to gold, some will see in that number the potential for a technical re-balancing of the price relationship between the two precious metals.

A headline to an article in this morning’s Wall Street Journal signals that an important psychological shift may be gaining a foothold in financial markets – Bond-Yield Fall Signals Unease. “An aging population means lower potential growth. That, in turn, boosts savings and depresses investment. Central banks struggle because they can’t really control these factors, and in a way, they can make it worse,” explains Silvia Dall’Angelo of Hermes Investment Management in that article. Adrian Day, president of Annapolis, Maryland-based Adrian Day Asset Management is more direct and matter of fact in his assessment. “There has been a dramatic change in sentiment,” he told Bloomberg on Friday in an article on gold’s breakout.

Quote of the Day
“Financialization is the smiley-face perversion of Smith’s invisible hand and Schumpeter’s creative destruction. It is a profoundly repressive political equilibrium that masks itself in the common knowledge of ‘yay, capitalism!’. Financialization is a global phenomenon. In China, it’s transmitted through the real estate market. In the US, it’s transmitted through the stock market. Financialization is the zombification of an economy and the oligarchification of a society.” – Ben Hunt, Epsilon Theory

Chart of the Day

Chart note: “The figure,” say the authors of this study published by the St. Louis Federal Reserve, “shows that the uncertainty shocks that hit the economy in the fourth quarter of 2018 and in the first quarter of 2019 (January) have been the largest during our sample period. Based on the framework we use, this finding has potentially ominous implications for the U.S. economy.”  A fitting chart as we weigh the effects of a possible breakdown in trade talks between the United States and China, an imminent recession and a rapidly changing approach to monetary policy at the Federal Reserve.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold breaks $1400 then retraces – up $57 and 4% on the week

(USAGOLD – 6-21-2019) – Gold broke through the $1400 mark overnight to trade as high as $1410 before retracing to current levels. It is still up $7 on the day at $1398 as we post today’s DMR.  Silver is priced at $15.36 and down 10¢ on the day.  All in all, it has been quite a week for gold.  It is up $57 from last Friday’s close at $1341 – a 4% gain through today’s early going. For those playing catch-up, yesterday’s DMR will provide a sense of what is driving prices.  More can be gleaned by a thorough review of the posts at our Live Daily Newsletter over the past few days.

PIMCO, the bond fund, has developed an analytical tool that tracks “the relationship between gold prices and interest-rate yields,” writes Lauren Silva Laughlin in the Wall Street Journal’s Heard on the Street column. “[It] concludes that for every 1 percentage point decline in inflation-adjusted yields, gold prices should move up by roughly 30%. In that light, the recent jump in gold prices looks fairly tame. Since the end of October, inflation-adjusted yields on 10-year Treasurys have fallen roughly 0.9 percentage point, while gold is only up about 13%, PIMCO notes. The fund manager figures gold should have risen 20% to 30% in total based on the yield movement.” At the end of October gold was trading at $1215 per ounce.  For gold to reflect PIMCO’s projected gains, it would need to be priced in the $1450 – $1575 range.

We will update later in the day if anything of interest develops.

Quote of the Day
“Our central bank monetary-led boom has made debt replace wealth for a long time. That’s not sustainable, of course. (We are ‘mining’ our soil for short-term gain.) We’ll see a return to the significance of productive stuff again I think, and that even includes farming – maybe especially farming. And the Midwest has a pretty good track record with productive stuff. Hard assets will matter again. But of course, I sound ridiculous even saying such things. Like a grumpy old grandpa.” – Mark Spitznagel, Universa Investments (as quoted by columnist, P.J. O’Rourke)

Chart of the Day


Click to enlarge

Chart note:  For those exploring the virtues of gold ownership, today’s Chart of the Day is illustrative. Gold has provided a positive return in 15 of the last 19 years. It is up 8.42% thus far in 2019 (through June 20).

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Trump’s ‘maximum pressure’ Iran strategy stokes war fears

Financial Times/Demetri Sevastopolo/6-17-2019

“’I genuinely believe the president hopes that his approach of maximum pressure will lead to talks but . . . the policy that he has approved may lead to the war that he doesn’t want,’ said Robert Malley, a Middle East expert who heads the International Crisis Group.”

USAGOLD note:  This article has some scary aspects to it but none scarier than a claim by Trita Parsi, author of the book Losing An Enemy that Trump’s “advisers are giving him advice that he believes is an effective way of getting to the [negotiating] table, but they know is an effective way of ensuring it escalates into a military confrontation.” [Emphasis aded]


Repost from 6-17-2019

Posted in Today's top gold news and opinion |

Gold calms somewhat after frenzied $40 rise in Fed meeting aftermath

(USAGOLD – 6/20-2019) – The gold market has calmed somewhat after the frenzied rise of yesterday afternoon. Its rapid ascent began at the conclusion of yesterday’s FOMC meeting and culminated a few hours later at five-year highs. Early yesterday afternoon the metal was trading at the $1345 level. By the end of the afternoon it had blown through the $1360 technical resistance mark to trade at $1385 – up $40 from the price prior to the Fed meeting and up $110 from where this rally began May 30th ($1276).  Silver – in catch-up mode – is up 25¢ at $15.40.

Gold’s price behavior suggests both a resumption of the uptrend in place before the meeting and new impetus from the strong undercurrent at the FOMC toward a more accommodative rate policy. Though the actual vote was 9-1 to keep rates where they are, the Fed’s dot-plot showed a divided committee on rates with eight of 17 members forecasting rate reductions by the end of 2019. The strongest reactions thus far have been in the safe-haven category – gold and U.S. Treasuries. Though much of gold’s impetus is the result of fresh positioning among speculative traders, we cannot rule out short-covering also playing an important role.

Michael McCarthy, chief market strategist at CMC Markets Asia Pacific, provided a workable summary of the forces currently at work in the gold market. “Easier monetary conditions are likely here to stay,” he said in a Bloomberg report last night. “The important aspect of this run higher is that it’s breaking through important technical resistance levels, so we’ve also got technical impetus adding to that fundamental shift in monetary conditions. Throw in a weakening U.S. dollar, we’ve got every reason to expect a good performance from gold.”

Additional note:  Though the Fed meeting provided the catalyst for gold’s rapid ascent, it does not fully explain its magnitude.  For an inkling of the fundamental forces undergirding gold’s rapid rise, we guide you to a post at Live Daily Newsletter page featuring Jeff Gundlach’s thinking on the subject. He talks about the Fed following the bond market instead of attempting to lead it – in other words, chasing rates higher rather than attempting to dictate them. We believe he is on to something. In our view, had the Fed opted to drop the Fed rate .25% (the typical increment raising and lowering) yesterday, it could have actually been read by the markets as restrictive. Instead, it stood aside meaning it was content to let the market dictate rates and the market, in turn, has a strong inclination to drive rates lower in the dash for safe havens. In a world in which interest rates look to be trending back toward the zero bound, gold is an asset that not only provides a safe haven and store of value, but also the potential for upside appreciation. That attribute is not likely to be lost on investors around the world – including those who manage large investment funds.

Quote of the Day
“[Y]ou should have it [gold] because you never know what our political leaders are going to do. . . Gold keeps its intrinsic value better than anything else. When you see the nominal price change, that’s not the value of gold changing, that’s the value of the dollar or whatever currency you’re talking about, changing in value. Gold is the constant, like the North Star. Yes, you should have it, a piece of it, just for peace of mind.” – Steve Forbes, Forbes Magazine (GoldSeek interview)

Chart of the Day

Click to enlarge

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold resumes pre-Fed meeting uptrend, gains new impetus

AFTERNOON UPDATE

Gold broke abruptly to the upside in the wake of the Fed meeting then leveled before surging again in late afternoon trading. It is now up almost $11.50 on the day at $1357. Silver is up 14¢ at $15.16. Gold’s behavior suggests both a resumption of its uptrend before the meeting and new impetus from the strong undercurrent at the FOMC toward a more accommodative rate policy. Though the actual vote was 9-1 to keep rates where they are, the Fed’s dot plot shows a divided committee on rates with eight of 17 members forecasting rate reductions by the end of 2019. The strongest reactions thus far have been in the safe-haven category – gold and U.S. Treasuries. The 10-year Treasury yield dropped from 2.09% to 2.03%. The stock market was clearly disappointed moving higher by only 40 points in the meeting’s aftermath.

Posted in Today's top gold news and opinion |

Gold drifts in narrow range ahead of Fed meeting outcome

(USAGOLD – 6/19/2019) – Gold drifted in a narrow range overnight and into the open of U.S. trading as financial markets await the outcome of the FOMC meeting due later this afternoon.  Gold is priced at $1344 – down $2 on the day.  Silver is trading at $15 – down 2¢ on the day.  Yesterday, gold seesawed on trade and forex developments, but encouragingly managed to end the day on an up note. The general trend has favored the upside of late, but the results of the Fed meeting are likely to either boost or undermine that bias.  We will cut today’s report short this morning, but invite you to return to our live daily newsletter page later in the day for an update if anything of interest comes of the Fed meeting.

Quote of the Day
“Reality is far more vicious than Russian roulette. First, it delivers the fatal bullet rather infrequently, like a revolver that would have hundreds, even thousands of chambers instead of six. After a few dozen tries, one forgets about the existence of a bullet, under a numbing false sense of security. Second, unlike a well-defined precise game like Russian roulette, where the risks are visible to anyone capable of multiplying and dividing by six, one does not observe the barrel of reality. One is capable of unwittingly playing Russian roulette – and calling it by some alternative ‘low risk’ game.” ― Nassim Nicholas Taleb, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets

Chart of the Day

Chart note: Since the turn of the new century, gold consistently provided a real rate of return on investment when measured against inflation. In fact, it provided a real rate of return in twelve of the nineteen years represented on the chart. The period was one of subdued inflation. Gold’s performance, as a result, took many analysts and professional money managers by surprise and altered the perception among money managers that the precious metal is solely an inflation hedge.

 

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold pushes sharply higher in advance of important Fed meeting

(USAGOLD – 6/18/2019) – Gold pushed higher this morning in a move that began during Asian trading hours and gained impetus at the London morning fix. It is trading at $1353 – up $13 on the day.  Silver is up 16¢ on the day at $14.99. The metals surged in advance of what has quickly become a very important FOMC meeting scheduled later in the day. Gold’s push to higher ground is in itself an unusual turn of events.  It usually struggles ahead of Fed meetings.

A Bank of America Merrill Lynch study released this morning shows top money managers the most bearish they have been since the 2008 crisis. Interestingly the study mentions “monetary policy impotence” as one of the group’s primary concerns along with the trade war and the possibility of a recession. The survey group has $528 billion under management, according to a Bloomberg article. The report reflects the high degree of pressure Wall Street is putting on the Fed to move on interest rates.  A number of top fund managers have publicly advocated gold ownership in recent months.

Wall Street is not alone in pressuring the FOMC. This morning in directing a barb at Mario Draghi and the European Central Bank President Trump also took indirect aim at the U.S. central bank. “Mario Draghi just announced more stimulus could come,” he said, “which immediately dropped the Euro against the Dollar, making it unfairly easier for them to compete against the USA. They have been getting away with this for years, along with China and others.” The president’s comments signal that the trade war could become a currency war as well with the Fed caught in the middle of it.

Quote of the Day
“If I had to pick my favorite for the next 12 to 24 months, it would be gold. If it goes to $1400, it goes to $1700 rather quickly. When you break something like that [the 75 year expansion of globalization and trade], a lot of times the consequences won’t be seen at first. It might be seen one year, two years, three years later. . .  So that would make one think that it’s possible that we might go into a recession or make one think that it would make rates go back toward the zero bound level and of course in a situation like that gold is going to scream.” – Paul Tudor Jones, Bloomberg interview 6/12/2019

Chart of the Day

Chart note:  Gold has been on a solid run since mid-August of last year.  It is up nearly 14% over the 10-month period.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold reverses overnight downtrend, now up marginally on the day

(USAGOLD – 6/17/2019) – Gold has reversed an overnight downtrend that took it just below the $1335 mark.  It is now trading at $1342 up $1 from Friday’s close and $7 from the overnight bottom. Silver is up 2¢ at $14.91. Since vaulting to the $1355 level on Friday, gold has retraced some of its gains (from the $1280 interim bottom at the end of May) but looks now like it might be regaining its footing.

Financial markets, in general, are in abeyance this morning and weighing potential outcomes from this week’s FOMC meeting.  The Fed will be addressing serious market concerns about a possible recession and the ill-effects of the U.S.-China trade war at its meeting tomorrow and Wednesday.  Though most analysts feel a rate decrease will not come until July, there is a lingering cloud of unpredictability hanging over this meeting. A surprise of some kind is not out of the question.

Quote of the Day
“One thing that amazes me about the current cohort of global central bankers is the lack of insight into the fact that their extreme loose monetary policy and financial repression may actually be making deflation in the real economy worse – despite clearly succeeding in creating rampant inflation in financial assets. To be sure some of the major players in the central banking orbit, such as ex-Fed Governor Kevin Warsh, have broken out of the QE group-think that grips the minds of central bankers. Warsh has openly stated that financial repression has exacerbated, rather than cured, our economic ills.” – Albert Edwards, SocGen

Chart of the Day

Chart note:  This chart shows the connection between inverted rates and recessions.  Some say that the rate inversions predict recessions, other say inversions create recessions.  Either way, central banks tend to stimulate economies when recessions surface or even prior to their surfacing.  The next Federal Reserve Open Market Committee meeting occurs Tuesday and Wednesday and we should know more about its rate stance by Wednesday afternoon.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold rises sharply on Mideast tensions

(USAGOLD – 6/14/2019) – Gold rose sharply in overseas markets last night after Secretary of State Mike Pompeo blamed Iran for the tanker attacks in the Gulf of Oman. That strength carried over to the COMEX open in New York where it is now trading at $1350 – up $5.50 after being up $9 yesterday. Though the tanker attacks are the clear catalyst for the upside, safe-haven demand and the price were already in a steady upward trajectory on recession, trade and interest rate concerns.  Silver is up 3¢ at $14.98. Technical analysts have long identified the $1350-$1360 price level as strong overhead resistance for gold.

Stay tuned.  We will update this afternoon if anything of interest develops.

Quote of the Day
“If we don’t quite know what the future holds, there is little point in getting carried away by very fancy mathematical calculations of optimal portfolios. Don’t rely on past data to be a good guide. Try to think through what mix of assets gives you the best chance of surviving some big event. That must mean including assets that are negatively correlated or uncorrelated in your portfolio. And I am very struck by the fact that over many many years, central banks, governments and individuals have always, despite the protestations of economists, held some gold in their portfolio. Obviously, there is no high running return, but when unexpected things happen, particularly when governments rise and fall, then gold is a means of payment that everyone is always prepared to accept. And I think that’s why even central banks have always had a role in their portfolios for gold.” – Mervyn King, former Governor, the Bank of England

Chart of the Day

Chart note:  This chart shows how both the dollar and gold reacted to the start of the credit crisis from late 2007 to late 2008.  The initial reaction for gold was a strong move to the upside.  For the dollar, it was the opposite – a strong move to the downside. Then in early 2008 as the dollar strengthened, gold declined. But for both that slice of price history was more a beginning than an end. In the ensuing three years (not shown), as the depth of the crisis became apparent and central banks launched stimulus policies, gold kicked into overdrive rising from the $720 level to nearly $1900 per ounce.  The US Dollar Index declined by about 18% over the same period.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

Gold reaction to Gulf of Oman tanker attack muted

(USAGOLD – 6/12/2019) – Gold’s reaction to the tanker attack in the Gulf of Oman has been muted thus far. It is up $2 on the day at $1336 after being up as much as $5 in overnight trading. Oil, on the other hand, rose over 3% on the news. A similar rise in gold would have had it up $40 on the day.  Silver is up 4¢ at $14.81.  As it is, the chief determinants in capital flows remain the potential for a recession, a possible escalation of the trade war between the U.S. and China and falling interest rates in response. Over the past two weeks, gold has been a prime beneficiary of those flows led by professional money managers seeking a safe haven.  Its price is up almost 4.5% since the end of May as a result.

Highly-regarded billionaire investor Paul Tudor Jones is among that group of professional money managers with a favorable outlook for gold. “If I had to pick my favorite for the next 12 to 24 months,” he told Bloomberg in an important interview, “it would be gold. If it goes to $1400, it goes to $1700 rather quickly.” Tudor Jones goes on to say that the U.S. is reversing 75 years of expanding globalization and trade. “When you break something like that, a lot of times the consequences won’t be seen at first. It might be seen one year, two years, three years later. . .  So that would make one think that it’s possible that we might go into a recession or make one think that it would make rates go back toward the zero bound level and of course in a situation like that gold is going to scream.”

Quote of the Day
“Debasement was limited at first to one’s own territory. It was then found that one could do better by taking bad coins across the border of neighboring municipalities and exchanging them for good with ignorant common people, bringing back the good coins and debasing them again. More and more mints were established. Debasement accelerated in hyper-fashion until a halt was called after the subsidiary coins became practically worthless, and children played with them in the street, much as recounted in Leo Tolstoy’s short story, Ivan the Fool.” – Charles P. Kindleberger, Manias, Panics and Crashes

Chart courtesy of TradingEconomics.com

Chart note: If you follow the on-going trade war between the United States and China with even passing interest, you have no doubt come across references to China selling U.S. Treasuries as its ultimate hole card. This chart shows something that few, including many financial journalists, acknowledge: China has been unloading exchange reserves since 2014 when they peaked at nearly $4 trillion. Most of those reductions, which have taken China’s reserves to a little over $3 trillion (a 25% reduction) occurred from 2014 to 2017 and came as part of its policy to smooth the yuan exchange rate against the dollar and prevent wholesale capital flight. It is unclear at this juncture to what extent China would be willing to drain reserves in defense of the yuan at this point in time. Trading Economics, as the chart shows, projects further reserve reductions in the future.

Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |